What the Hospitality Industry has learned from this Pandemic The future of the luxury hotel business

Topics; 

Part 1:  - What the Hospitality Industry has learned from this pandemic,

Part 2:  - The Future of the Luxury Hotel Business.

 

Online Session with Giovanni Angelini of Angelini Hospitality

Hong Kong,  Oct. 19, 2021

Organized by the School of Hotel and Tourism Management of the

Hong Kong Polytechnic University

 

Very good morning to all and I hope that this session is of interest and useful.

Would like to thank the School of Hotel and Tourism Management of the Hong Kong Polytechnic University for having invited me to address this session.

Please understand that I am not a professor nor a teacher. In line with my background, I look at things from the business side and at what impacts the overall performance.

I have made some notes for this session and I will refer to those. If you would like to have a copy of those notes, please contact Professor Catherine Cheung.

The topic of the conversation today revolves around “what the industry has learned from this pandemic” and the “future of the luxury hotel business”.

And of course, I am happy to answer your questions at the end of the session.

 

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Part 1:

What the Hospitality Industry has learned from this pandemic?

The pandemic has both revealed and accelerated several trends that will play a substantial role in the shape of the future of hospitality.

I will be addressing a number of topics and issues on the overall situation, some may be relevant to you while some are not.

Of course, we have to understand that no one alive today has experienced a pandemic of this dimension. 

Most of us had to manage other crises in the past like, in the case of Hong Kong, the SARS epidemic that was very bad indeed but it was much more of a severe regional epidemic and it only lasted 4 months. 

This pandemic is very much different and I believe that we all know the difference between epidemic and pandemic.

No one was prepared for the economic and social impact of this pandemic and a lot of mistakes have been made by many from the governments, the medical sector, and also the business sector

A first-time experience for all of us in handling this most challenging and unprecedented situation.

 

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This pandemic has reminded us that in business we always must have the very basics in place. This morning I would like to highlight the 3 most important basics;

  1. An updated crisis management plan to be in place at all times. This calls for clarity on who is doing what and how. The plan is to be supported by continuous training. One of the objectives of this plan is to "expect the unexpected".
  2. Having an adequate line of credit from the banks or financial institutions specifically for stormy times like the present time.
  3. That the physical product of the property and the business, including guests and staff, is properly insured at all times. We must know what is insured, what is not and what can be insured.

Remember that cash flow drives almost everything in business and good leaders must know where to get cash during an emergency. This is of critical importance.

It is a fact that in emergencies, most organizations require additional loans/financing. Where-how to get those?

In business, we will learn from every crisis. Of course, we have to respond to those crises with the right strategies and with the right Action Plans.

So many stakeholders rely on us, on what actions we take and where/how we drive our business. So simple and so basic.

 

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First I would like to point out that pandemics of this dimension need international cooperation. Unfortunately, this has not happened. Very sad indeed to see every country on its own, each reinventing the wheel.

Making things worse, from the very beginning of the pandemic, we have seen an unusual surge in fake news and misinformation exploiting public fear. So many specialists out there, but all wrong.

In our digital age, infodemics spread like wildfire creating fear, confusion, distrust, and in some cases even stigma.

We have learned that all sectors of the travel and hospitality business have been seriously affected by this crisis, in particular the airlines, the hotels, the cruises, and the respective travel agents. Survival is at stake.

Learned that the pandemic has accelerated global shifts in consumer behaviors, values, and expectations. 

Consumers have become much more selective about what they consume, how they travel, and where they stay.

We learned that travelers, young and old, are looking for a second opinion from someone they trust when booking travel. And the role of specialized travel agents is becoming important.

We also learned that at present, most travelers purchase a travel insurance.

Hygiene, sanitation-safety-security, protocols, and quality of indoor air (of particular importance) have become priorities for travelers and consumers in this industry replacing the location, the price, and even the brand.

Touchless and contactless options are expected by some market segments.

It comes very clear that health and safety come first for all.

We have learned that consumers are expecting a much more friendly cancellation policy without the risk of losing their deposits. Potential travelers want the flexibility to cancel or postpone.

Learned to cope with lockdowns and how to work from home.

Also learned to make the best use of virtual and hybrid technology for meetings and conferences. This will make a substantial impact on business travel once the pandemic is over.

A new trend that is developing very fast is the guarantee of a 24 hours stay, away from the 12-noon check-out and 2.00 PM check-in. More flexible timing is expected.

The industry has rediscovered the importance and the potential of the local and domestic market and in a number of destinations, staycation has been successful.

In most cases, we have transformed the way we live, work, and interact. Many of those changes are here to stay.

And it appears that there will be no going back to the way things were before the virus emerged.

 

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So what we have to do?

As we enter a "new normal" in our industry, there is no time like the present to take stock of the organization's health and forge ahead with new solutions.

Do not repeat the mistakes of the past. And accepting the "status quo" of the past is in most cases, a gradual decline into failure. 

Hospitality is a fragmented and perishable business, therefore to succeed, it is imperative to create a strong competitive advantage.

In business, you must be clear on what is your competitive advantage, how to get your customers engaged with your brand, and why they return.

It is also a fact that in this industry, "everybody copies everybody", and this is why a strong competitive advantage is simply a must. 

It is also absolutely essential to listen and most importantly understand your customer needs and expectations. A big mistake is to take your customers for granted.

Remember that customers have a wide range of choices and you must have a clear reason for them to coming back to you.

Looking ahead, the core business of providing hospitality and new experiences will not go away. Neither the basic rules of doing business; revenue-cost-risk-profit. 

But the industry needs to rethink its administrative, economic, and sustainable processes. Its ability to differentiate and innovate.

In this competitive environment, it comes very strongly that Brands must create confidence, trust, and value.

We learned that there is a clear shift towards sustainability, social, and responsible tourism. The consumer mindset is changing very fast in those areas.

A survey done by the Amex Trendex, in August this year, shows that 52% of travelers say they have become more interested in responsible tourism.

And 87% want to have a positive impact on the community they are visiting. This is a big number and it gives us a very clear indication.

The same Amex survey states that in most cases, travelers are willing to pay a premium to use brands that demonstrate social and environmental responsibility including the production of clean renewable energy.

In most cases, the hotel industry has to take sustainability much more seriously, no more of the "lip talk". Proper targets and KPIs metrics are to be set on an annual basis and properly measured. 

(There is a say that "if you can't measure it, you can't improve it). 

If you are new at this, suggest you start by learning how to measure the carbon footprint emissions of your establishment and what are the targets.

And remember that when it comes to sustainability, hotels have to be part of the solution, not of the problem.

Demand for popular destinations (mass tourism) is expected to fall while there is a demand increase for greener/less crowded destinations.

Learned "to-do more with less", be much more efficient, agile, flexible in all what we do. With fewer people, and with more automation including cloud-based solutions.

This calls for flatter and less bureaucratic organizations and the elimination of internal silos. Now more than ever, it is a must to have a unified and capable team.

A democratic decision-making process that allows people to take ownership should be the norm. A process that recognizes creative minds and initiatives. 

 

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The hospitality industry has always been and will remain a people-first business

People are the ones who make great brands and great organizations. People are the ones who help companies to come out of crises.

Learned that the industry has to do a much better job in the usage of technology, digitalization, and robotics without taking away the human touch and the face-to-face interaction with customers.

We also learned that productivity, accountability, and empowerment are very much related. Cannot have one without the other.

We learned that the various employee satisfaction surveys are as important, even more important, than the customer satisfaction surveys. 

It is useful for all of us in this business to remember what comes first; the chicken or the egg? Do remember that your people always come first, as simple as that.

The stressful events of past two years have taken a toll on both the physical and mental health of workers within the industry and this has to be addressed seriously. 

Indications are that the attitude is changing as well and not for the better. A lot of work to be done here.

We have learned that people expect security and job satisfaction. The hourly paid formula and the part-time jobs are not working any longer and it must be addressed. 

"Don't try to save one cent and lose one dollar" when it comes to employees satisfaction.

 

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We have learned that trends are rapidly shifting, and in response, rules have to be rewritten, and mindsets have to change.

Standardization alone can no longer be the norm. We have to do better on responding to the new waves of consumer demands and preferences,  and a willingness to explore new solutions. 

A shift in marketing strategies focusing on communication, segmentation, distribution channels, new sources of business, loyalty, and of course what it takes to achieve market leadership.

We learned that a strict discipline on frequent forecasting, pricing strategy, target marketing, personalization, direct communication, advanced revenue management/systems, and others has to be enforced.

Understanding how today's travelers navigate the new normal will help the industry to position its products and brands.

And the creation of credible value perception, quality, and consistency are simply essential for success.

In this business, the RGI, the TRevPAR, and the GOPPAR will have to become the measurement standards.

 

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And of course, now more than ever, the industry needs strong leadership.

Under the present situation, there is no space for political, self-focused, inexperienced leaders. 

The industry needs visionary trendsetters that can create strong and aligned teams and demonstrate leadership agility.

Fine-tuning the day-to-day operation is simply not sufficient, leaders must have a much broader perspective.

Leaders who are driven by values, selfless principles, empathy, and put results before ego. In the present difficult situation, building trust in leadership is simply imperative.

The industry needs leaders who can put in place a strong culture of care, accountability, responsibility, and profitability. There should not be confusion on those.

 

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Looking Ahead;

We know that full vaccination and frequent testings are basic requirements to international travel and we may see vaccine passports certifying the vaccination.

But it is a fact that quarantine imposed by the various governments is the biggest deterrent to international travel. No one likes to spend two-three weeks locked in a hotel room.

Cannot continue like this for much longer and in the end, we have to learn to live with the virus-like we learned to live with the flu and cannot be paralyzed by fear. 

The whole world has to face this virus for a number of years to come as it will not disappear so soon. But life has to go on and business has to go on.

Achieving high vaccination percentage and high immunity levels is simply necessary. There should not be exceptions here.

Of course, must take all necessary precautions and comply with all basic safety measures in a safe and careful way.

International travel may gradually resume from late this year to early next year, but it would take much longer to get back to the same level of 2019. 

On the way I see it, 2023 may be a stabilizing year and we may see healthy volume from 2024. Of course, those are only assumptions.

 

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Part 2:

The Future of the luxury hotel business;

It is not easy to predict the future but all indications are that demand for luxury travel will continue to be strong, if not stronger, as compared with pre-pandemic time.

It appears that luxury travelers are eager to start exploring again, first within their familiar destinations then as the situation improves to new areas and destinations.

What it is clear is that there will be much more focus on recognized quality products, reliable brands, new facilities, and evidence-based services. 

The overall image of the brand, and the perceived value are key influencers on consumers and decision-makers. 

Space, privacy, reassurance, experiences have become basic consumers' expectations and the so-called luxury establishments have to provide those and more.

People will still travel for business and leisure, of course, but they will travel smarter, favoring low-risk destinations and the safest modes of travel.

Making hotel guests comfortable, both physically and mentally, is simply a must. So is the importance of personalizing their stay.

It is anticipated that post-pandemic, luxury travelers will be making purchases based on all the above criteria and expectations. 

The all-inclusive (room-meals-activities and others) is a new growing trend among luxury resort hotels in several parts of the world. Most hotel groups are looking at it.

Who are the best customers for luxury products?. It is a fact that experienced senior generations have the time and more money to spend on travels. 

Young at heart, they are looking to have selected memorable experiences and want to try new things.

They will pay for their experiences without much hesitation, and at present, they are simply the best spenders for the hospitality industry.

The pandemic has proven that the luxury traveler stays, in most cases, away from the "staid/cookie-cutter" hotel products and is more willing to try new products, especially those offering more meaningful experiences. 

A very important and useful question for luxury hotel operators; "what is more important for your customers, loyalty points, or the brand?" As a luxury operator, you must find the correct answer to this.

In most cases and destinations, hotels are seasonal, cyclical, and subject to shifts in market and business conditions. 

In this situation, it becomes critical for a luxury property to maintain high quality-consistency-image at all times.

Top-of-the-line brands cannot afford to confuse the consumers, nor compete with lower products and categories. There must be consistency in product quality-service pricing.

Luxury hotels should avoid price wars as in principle, lower rates do not create demand. 

Operators have to accept the fact that there is no winner in a race to the bottom with pricing, a typical and expensive mistake made by many.

The success of a deluxe brand relies on understanding the needs and expectations of various demographics and nationalities. 

Brands that unintentionally make consumers feel they are "too old" or "too young" to use their product may risk alienating entire generations and will not please anyone.

It is clear that demand for luxury hotels will remain strong and perhaps it will increase as compared with the past.

But it is also clear that consumers will not accept mediocrity from luxury products. 

Luxury hotels have to be comfortable, efficient, practical, distinctive look-architecture, with strong competitive advantage/s and clear purpose.

Top-of-the-line facilities are simply necessary for luxury hotels and this may include exciting restaurant concepts, the latest in wellness services, recreation activities, a variety of settings, amenities, and others.

Ultimately, the success of luxury hotels revolves around the positive attitude and efficiency of its people. The ones who provide customers with unique and memorable experiences.

On the luxury segment; developers-owners-shareholders-operators have to accept and fully understand that a balanced economy of scale is the key to an acceptable ROI. 

Need the right product and the right size. In principle, very difficult to generate returns from small hotels, and on the other spectrum, large hotels are more volume-driven.

 

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Take-Home;

There's no doubt that crises come ripe with problems and far-reaching negative impacts. 

But crisis can also be the catalyst for positive change-creating new opportunities.